TREASURIES-Yields rise on stronger jobs market, higher labor costs

Reuters Staff

3 Min Read

* U.S. jobless claims fall, labor costs rise
* Fed seen more likely to hike interest rates in June
* Investors renew hopes for Trump's fiscal agenda
By Karen Brettell
NEW YORK, May 4 (Reuters) - U.S. Treasury yields rose on
Thursday after jobs data showed continued improvement in the
domestic labor market, helping boost expectations that the
Federal Reserve will raise interest rates again in June.
New applications for U.S. jobless benefits fell more than
expected last week and the number of Americans on unemployment
rolls hit a 17-year low.
Other data showed a jump in labor costs, raising
expectations that wages will continue to increase and help boost
inflation to the Fed’s 2 percent target.
“The labor cost number was higher than expected, which is
giving people the belief that wages are going up,” said Charles
Comiskey, head of Treasuries trading at Bank of Nova Scotia in
New York.
Benchmark 10-year notes fell 14/32 in price to
yield 2.36 percent, their highest since April 10, and up from
2.31 percent late on Wednesday.
The U.S. House of Representatives was set on Thursday for a
cliffhanger vote to repeal Obamacare, with House Republican
leaders expressing confidence that the bill will pass.
The belief that a healthcare overhaul will proceed has
boosted investor expectations that the Trump administration will
also be able to pass fiscal reforms aimed at bolstering economic
growth.
“It all falls into the story that the Fed is going to
continue to raise rates, that growth is going to pick up with
fiscal reform and therefore interest rates have to go higher,”
said Comiskey.
Expectations of a rake hike in June increased after the Fed
on Wednesday downplayed weak first-quarter economic growth as
transitory and emphasized solid inflation and the strength of
the labor market.
Futures traders are pricing in a 74 percent chance of a June
rate hike, up from 71 percent before the Fed statement,
according to the CME Group's FedWatch Tool.
The next major U.S. economic data release will be Friday’s
payrolls report for April. Employers are expected to have added
185,000 jobs in the month, according to the median estimate of
101 economists polled by Reuters.
French centrist Emmanuel Macron was also seen as solidifying
his lead over far-right leader Marine Le Pen before Sunday’s
presidential election, which reduced demand for safe-haven U.S.
bonds.
(Editing by Meredith Mazzilli)
)